patrick.net

OK, now that the market is falling, as I would have expected, any thoughts?

Gov't Shutdown or not, it's always good to have some cash in case of a big drop or correction in the market. It's all about opportunity cost. Do you want a large amount of cash when the market presents you w/ a big "30-50% off sale"? Or, will that sale never come, while that cash could be earning dividends in a blue-chip stock, or other equity. That's the million dollar question.

So, while the amount of cash you put in the sidelines is a persoanl preference, and can change w/ your perception of how 'overbought' the market is, or some impending fiscal/global crisis, you should have SOME amount of cash ready.

One idea, is if you don't like a certain stock, and you are ready to sell it (to create your cash pile for the big correction), you could slowly scale out of that position in 1/3rds or 1/4 at a time. Those smaller 'scale-out' sales could be triggered when a news event confirms your 'correction guess', or if you feel the correction is more likely to happen. If not, or things don't point to a correction, keep the unloved stock till you get more info or direction... Just an idea to think about.

I would have thought this was a good idea 3 years ago. But since most of my stocks are 'buy and hold' dividend blue-chip stocks, I wouldn't sell these to create the cash pile. I do have some SLW that I'm 'thinking' of selling, but I'd sell at a $200 loss. Even though it's a tiny loss, I don't like to lose money..

AverageBear says

I would have thought this was a good idea 3 years ago. But since most of my stocks are 'buy and hold' dividend blue-chip stocks, I wouldn't sell these to create the cash pile. I do have some SLW that I'm 'thinking' of selling, but I'd sell at a $200 loss. Even though it's a tiny loss, I don't like to lose money..

Last time there was a crash, people sold everything including precious metals to cover margin calls. Do you think if there is a crash due to budgetary issues or a down grade history will repeat?

smaulgld says

Last time there was a crash, people sold everything including precious metals to cover margin calls. Do you think if there is a crash due to budgetary issues or a down grade history will repeat?

Smaulgold, I have no idea.... I can only control my own $$, and can't worry about things I can't control.

As far as precious metals go, i made REALLY good money (for a newbie, anyway) about 5 years ago. "Really Good money" means taking profits of 50%. I know, it's no 2, 3, 4, 5 or 10 bagger. I took those profits and used them for high-yield dividend companies, and a few really stupid investments. I slowly learned the last 3 years, and scaled into dividend growth stocks. So, that being said, if the market did crash, I won't be doing a thing. I'll only be selling and re-allocating if my stocks cut/cancel a dividend. The companies I've invested in now didn't cut/cancel their dividends in '09. (most actually increased their dividends that year)....If there is another crash, if I have any cash, I'll consider it a 'sale', and will buy more.

I'm not the 'gold bug' I was 5 years ago. Back then, I was 50% in GLD and SLV. Now, only 7% of my retirement savings is in SLW. I still believe silver is a good store of wealth and has more industrial uses (gold doesn't). But i've learned that DGI (dividend growth investing) not only matches, but beats inflation. History backs this up. Silver and gold can't make that promise, especially when you need to sell... If you're retired and NEED to sell PMs (not 'would like to' sell), and the market is down, you are screwed... Did I mention that I sleep well at night? :)